PBM Rebates: Injecting Kickbacks: Medicare Prescription Drug Program
- By
- Tom Modeen
How Rebates Allow PBMs to “Game” the System
Drug costs are rising significantly without measurable increases in net cost to the manufacturer. The result is Medicare’s prescription drug costs are exploding and patients are assuming greater financial responsibility for their prescriptions. Increased drug costs also result in higher reimbursement concessions (DIR Fees) funded by the provider pharmacy. The root cause of these problems are the higher demands PBMs are placing on drug manufacturers for rebates.
In order for a manufacturer to get medications classified as “on formulary” with large PBMs, rebates are mandatory. According to Citron Research, the rate of growth of PBM revenue in the category from 2013-2015 were double the rate of growth of gross drug spending.
“The reason drugmakers sharply raise list prices without a corresponding increase in net price is that PBMs demand higher rebates in exchange for including the drug on their preferred-drug lists”
— Enrique Conterno, President, Eli Lilly diabetes busines
Required manufacturer rebates never materialize in lower out of pocket costs to Medicare beneficiaries, reduction in costs to the Medicare Program or incentives for the dispensing pharmacy. They remain in the PBM coffers.
Express Scripts exploits the system like no other PBM. The percentage of revenue Express Scripts extracts from rebates is now equal to $ 100. per year for every citizen in the United States. With a significant amount of revenue manufacturers must apportion to PBM rebates, it is 
undeniable that less money is invested in bringing potentially lifesaving medications to market. Everyone loses, except Express Scripts.
This is a major problem in the United States and one that needs to be addressed by the new administration. The “knee jerk” reaction to high drug costs is always blame the manufacturer. Time to take a closer look at PBM tactics.
For further information on the topic, read the startling bulletin posted by CMS:
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